Saturday, December 29, 2007

It pretty common now a days to hear about company having huge lay offs and it is also common to hear news about CEOs and other top executives making large sums of money and still receiving huge bonuses.

Many times both things happen at the same time, while a company lays off a lot of people the people at the top get paid more and more.

It’s a pretty good scam when one thinks about it. Free up some company cash to make sure you get a little (and by little I mean a lot) extra cash to stick into your pockets. The funny thing is that the boards (unless they are the people getting the extra loot) and stockholders of these companies let these people do this, even when these steps don’t make logically sense.

Yes when a company is doing poorly it can make since to cut jobs. Which makes this odd is the number of times we see reports of a company being said to not be performing as well as it used to and needs to have lay offs just to make it but at the same time top executives are getting huge pay checks and bonuses. If a company is doing so poorly one needs to fire a lot of people then on would think that a company is doing so poorly that the people at the top shouldn’t award themselves.

It’s a flaw in the economics of our corporations. Stockbrokers our happy about the short term fix but don’t bother to ask “Hey how is giving the CEO and President lots of money making this company profitable?” If they did then in a number of cases people will realize that these action aren’t always the best (both for health of the company but also the economy.) They could either use this freed up cash to either would lower the number of new people dumped into or labor market or the money will be used by the company for other things like put it in R & D, marketing or any other area that can will look for new markets or improve the ones they already are in.